Hello. This is Jamie Kubiak from Cross Country Notes, and just wanted to welcome you to our series, How to Retire Early With Income Producing Notes and Keep your Day Job. Today we will be going over one of our assets in San Antonio, and let’s get started.
Note investing has definite advantages over more traditional real estate investing or investing in the stock market. Let’s start out with the perspective that we travel through life or simply towards retirement, there are different vehicles that can get us from point A to point B. For example, I just got back from California, and I could have traveled there from Austin, Texas by foot, by bike. I could have taken Uber, my own car, a bus or a plane. Note investing through joint venturing can be likened to flying by plane. What I mean by that is you can have an experienced pilot get you there safely and quicker than if you walked by yourself.
So, why mortgage notes? Well, there’re several reasons. First of all, it generates passive income. Remember, if you have a job, it’s great to have passive income to augment what you’re already bringing in. At Cross Country Notes, we create joint ventures with our investor partners to do just that. We do the legwork and bring the asset in order to profit ourselves as well as profit for our joint venture partners. Higher yields, typically double digit yields are what you’ll see with us. Nothing can be guaranteed as we can’t read the future, but that’s what we’ve seen in our business.
It’s also a great alternative to the stock market. These assets are based on real estate finance or paper. Real estate assets are managed by professionals, and they’re covered by insurance. You can generate tax-free returns using your self-directed IRA. What this means is that you can supercharge your investment growth by not having to subtract 30 to 40% in taxes from your profits each year.
A final very compelling reason for why invest in mortgage notes is it’s banking, and banking has been around for a very long time, and it’s a very profitable business. With mortgage notes, you too can “be the bank,” and you don’t have to have a lot of money to do so. You can actually get involved with less than it would take to rehab a house, for example.
So before we get started, just a quick reminder on what return on investment. The goal of any investment is just to let your dollars work for you, and with notes, you can let your dollars become your employees. They work to produce income for you, so you should put them to work every day. In short, this calculation of return on investment is a percentage that reflects just how productive your dollar, your investment, we’ll call him George, is working for you.
Here we have some numbers on one of the assets that we have that we’ve worked. This one’s located in San Antonio in a solid neighborhood. As you’ll see, the as-is value of the property is $100,000. It’s a single family home with a brick exterior, and it’s in good condition. Rental rate is $1,200 a month. If we were to buy this property or one similar to it and fix it up to make it perfect and sell it, we estimate rehab expense to be about $15,216. So this is talking about the real estate, this in the yellow box.
In the bottom table, this is the note. For example, this particular property has a note of, in the amount of $25,777, and the joint venture partner doing this deal with us brought $30,301 to the table in order to participate in the upside of this transaction. The income from the note is $398 a month, and this note matures in January of 2019.
So, looking at the numbers from the note perspective, there’s three likely scenarios. This top box reflects, well, if the borrower, if we get them to make payments on time, we can “rehab” the note and sell the re-performing note and get out a return of 16%. The breakdown is as follows. The annual income is $4769, and upon the successful rehab of the note, we would sell the note for $39,838 and make a profit of over $9,000.
The second exit strategy would be just to keep the property as a rental and it would have an ROI of approximately 16%. In getting these numbers, we were very conservative as far as estimating the rents and the repairs and management costs. That ROI of 16% is truly a passive investment. We have property management already figured in, repairs and vacancy.
The third box below, the foreclose and sell the property outcome, would actually reflect the highest return on investment of above 50%. Given what we know about the property and the market for foreclosed properties, the estimated foreclosure sale was $88,000, and the gross profit would be $47,266 approximately. All of this from a note less than $30,000, so the numbers are pretty good.
This is one of many videos that we’ll be making in the near future. These are pin drops or pins of the other assets we have in San Antonio, and we have others across the nation, and we’ll be producing more videos in the future. If you’d like to learn more, please subscribe to our channel for more videos and if you wanted to get started and learn more today, please go to our website, crosscountrynotes.com. We have a free mini course on how to invest in mortgage notes for high yields and passive income and retire early, which I think is a great goal for all of us to have.
This is Jamie Kubiak of Cross Country Notes. Thank you.